August 31, 2009

 

US Wheat Outlook on Monday: Lower on outside pressure, big supplies

 

 

U.S. wheat futures are expected to open Monday on the defensive amid pressure from outside markets, analysts said.

 

Benchmark Chicago Board of Trade wheat is called 4 to 6 cents lower. In overnight trade, September CBOT wheat was down 4 cents to US$4.63 per bushel and December CBOT wheat was down 5 1/4 cents to US$4.90.

 

Wheat and other markets are being pressured by a sharp sell-off in the Chinese equities market, and wheat will likely follow corn and soybeans to the downside, analysts said.

 

Ample supplies of wheat and limited production concerns around the world have weighed on prices, traders aid.

 

"There's a lot of business being done, but the consensus is there's a lot of wheat around the world," a trader said.

 

The trade is watching dry weather conditions in Australia, and Country Hedging analyst Steve Wagner said in a morning commentary that "concerns still exist for the Indian winter wheat crop as monsoons have not delivered on adequate moisture."

 

Farm Futures noted in a morning commentary that deliveries against the December CBOT contract were "huge at 5,646 contracts, as basis remains historically weak in the beleaguered soft red winter wheat complex."

 

A large number of deliveries were expected on first notice day, although the total was higher than some estimates.

 

Technically the market is under both short-term and long-term pressure, analysts said.

 

The next downside price objective for the bears is pushing and closing prices below solid technical support at the contract low of US$4.85 3/4 per bushel, a technical analyst said. The bulls' next upside price objective is to push and close December futures prices above solid technical resistance at the July low of US$5.32 3/4 a bushel.

 

First resistance is seen at US$5.00 and then at Friday's high of US$5.09 1/2, the technical analyst said. First support lies at the contract low of US$4.85 3/4 and then at US$4.75.

 

In international news, Australian agribusiness AWB Ltd. (AWB.AU) Monday held its estimated pool return on benchmark collective wheat sales, saying there are signs a long decline in world prices could be stabilizing, with several positive influences at work.

 

World wheat prices have fallen in response to two years of large production, but farmers in the Northern Hemisphere sowed a lot less wheat this year due to the price fall, AWB's General Manager Commodities, Mitch Morison, said in a statement.

 

Speculative funds cut 4,252 contracts from their CBOT wheat long positions and cut 2,706 contracts from their short positions, putting them net short 59,183 contracts, the Commodity Futures Trading Commission said Friday.

 

The supplemental commitment of traders report also showed that commercial funds cut 10,472 contracts from their long positions and cut 8,246 contracts from their short positions, putting them net short 95,325 contracts. Index funds cut 364 contracts from their long positions and cut 2,076 contracts from their short positions, putting them net long 172,179 contracts, the CFTC said.